India infrastructure

A stark dichotomy has emerged between Indian economic data and the reality on the ground. In the latest example, the Reserve Bank kept interest rates unchanged at its last monetary policy review earlier this month and issued a dovish statement. Signs of an investment revival are meagre and consumption demand remains weak – in strong contrast with the GDP growth estimates of the government and the Central Bank.

Despite general optimism following the election of the Narendra Modi government last May, the pace of economic revival has been slow as both investment and consumer demand remain weak. Read more

The Indian government’s annual budget – to be announced on Saturday – will be intensely scrutinised for clues about the evolving policy priorities of Narendra Modi, the prime minister.

But while many will be focused on expenditure and revenue plans, Indian business will be looking in a somewhat different direction. It is hoping that the budget will further reforms to bring about a lower ‘visible’ role of the government in the economy, under which it relinquishes or reduces its multiple roles of financier, manager, owner, policy-maker and regulator.

The budget is an ideal opportunity for the government to re-evaluate its role in the economy at a time when the private sector, states and local governments are playing an increasingly larger role in economic and social development. A greater ‘invisible’ role of the government simply as a facilitator of private sector investment is required. Read more

If Asia’s emerging markets are to avoid the middle income trap, they need to create foundations for the next phase of growth: they need to invest in infrastructure.

In the early stages of development, moving a worker from the land to a factory quadruples their value-added contribution to the economy on average. Much of Asia’s extraordinary growth to date has been underwritten by this one-off transition, but the windfall gains of rapid industrialisation are starting to decline and if the region is to continue on the road to prosperity it needs to find ways to boost productivity and encourage new economic activity.Read more

International air travelers will recognise the tag line from the HSBC campaign in airports worldwide: “In the future, South-South trade will become norm, not novelty”. If it depends on the Mahindra group and other Indian conglomerates, that tag line could become reality with regards to Africa and India.

Taking optimism to a new level, a collection of African leaders and Indian industrialists dared to dream big during a closed session of the WEF India Economic Summit in Delhi, agreeing to an informal ambition of $500bn Indo-African trade by 2020. Read more

Last week, India’s prime minister Narendra Modi launched an ambitious push to kick-start India’s relatively small manufacturing sector, lifting its share of India’s GDP to 25 per cent from 15 per cent.

This week, new data suggested how far off that goal may be. The HSBC India Manufacturing Purchasing Managers’ Index fell to a nine-month low in September, down to 51.0 from 52.4 in August. This was probably down to weaker domestic demand, said HSBC, since new export orders had picked up. Read more

Deutsche Post DHL, which makes money by shipping parcels around the world, plans to invest at least €100m in India over the next two years and is piloting a new e-commerce model for the Asia Pacific in the fast-growing market.

Japanese and Indian culture could hardly be more different, but senior executives at Toto, the Kitakyushu-based toilet products manufacturer, say doing business has been a breeze in Asia’s third largest economy.

The Japanese group, whose fancy ceramic toilet fittings are already used in premier properties like the Four Seasons and Oberoi hotels in Mumbai, opened a manufacturing facility in India this week hoping to expand in the fast growing market.

Toto launched a 180,000 sq metre plant in Halol, Gujarat, that will produce some 500,000 toilet bowls every year. The group’s president, Madoka Kitamura, told beyondbrics that he expects about half of the output to be sold within India while the rest is exported to the Middle East and Europe. Read more

Accelerating urbanisation – especially in India and China – is set to boost emerging Asia’s share of global spending on infrastructure and capital projects over the next decade, slashing the developed world’s market share by 2025, according to a PwC report released on Monday.

The report, for which Oxford Economics researched trends in 49 countries on six continents, estimates that the world’s urban population is currently swelling by around 1.5m people a week, mostly because of rural-urban migration in the emerging world. In India, for example, the urban population is likely to rise by some 500m over the next four decades. The Pakistan city of Karachi grew by 80 per cent to 13m in the decade to 2010. Read more

Within an hour of landing in most Indian cities, visitors see what is holding back Asia’s third largest economy. They get a taste of the packed and potholed roads, and in some cities they might see an empty construction site that promises a new metro.

The business community has great faith in Narendra Modi, India’s new prime minister, and his ability to improve infrastructure thanks to his track record as chief minister of the state of Gujarat. But the question is: will Modi be able to improve infrastructure as quickly and efficiently at the national level? Read more

By Ajay Chhibber, Director General, Independent Evaluation, Government of India

The world’s largest exercise in electoral democracy has delivered a clear mandate for development. The aspiring voters want decent jobs and a growing India. They have pinned their hopes on a Modi-led government to deliver them the kind of India where real jobs are created and services are delivered cleanly and efficiently. They want better governance not bigger government. They want a hand up, not a handout. They want India to become a US$10tn global powerhouse.

The UPA government was given such a mandate in 2009, but misread the message and blew away five years into more handouts, large fiscal deficits, raging inflation and eventually a slumping economy. Instead of creating real jobs, it focused on make work through badly run schemes like MGNREGA (The Mahatma Gandhi National Rural Employment Guarantee Act) which have cost the country over Rs 1tn so far. It saw expanded subsidy programs costing almost 4 per cent of GDP – but with not much of it going to the poor. Read more

Equity and currency markets seem to have priced in a strong Bharatiya Janata Party (BJP)-led coalition government, and could no doubt rally further if the BJP alliance crosses the majority mark of 272 when votes are counted on 16 May. The logic is clear: a stable coalition would be much better able to coordinate disparate ministries, slash red tape and reduce the fiscal deficit than one reliant on regional satraps with minds of their own.

Let us assume that a strong Narendra Modi-led government does emerge. This would raise already high expectations of a solid reform agenda that accelerates investment while inhibiting crony capitalism. Recall that the Congress Party (CP)-led United Progressive Alliance (UPA) was reelected with much fanfare in 2009, but was derailed by revelations of crony capitalism and state capture. Read more

It’s official. Jaiprakash Associates, the Indian energy and infrastructure conglomerate, has sold off two hydroelectric plants in northern India.

The last time one of the group’s subsidiaries did something similar, its shares rallied on hopes that the move would bring down the group’s debts. But this time the stock has tanked because of signs the plants may have been sold too cheaply. Read more

India’s Prime Minister Manmohan Singh flew over an infamous site as his aeroplane came in to land in Mumbai on Friday: a sea of tightly packed slums that runs right up to the airport’s fence, signalling arrival at India’s teeming financial capital.

Yet as he arrived to inaugurate the city’s gleaming new international terminal, Mr Singh hoped to clean up another stain on its reputation: the airport itself, and its dismal record of chronic delays and crumbling facilities.

Brazil’s infrastructure is poor, even dismal in some cases, but this is more relative to its own needs and its income level as a country with a per capita income level among the Brics second only to Russia. At least in my experience, it is not bad in absolute terms when compared with many other developing countries, particularly those in the poorer parts of Asia, such as India. Read more

And yet, when religion and revelry are at stake, this same country can pull it together and host the 55-day Maha Kumbh Mela festival, where 9m pilgrims are provided with all the shelter and services they need. Read more

India’s established metropolises are saturated with investment activity. Now, tier-two and tier-three cities are emerging as investment destinations and a new report from Cushman and Wakefield explains how much money is going into what – and where. Read more